Stock To Buy Now - Noida Toll Bridge Company

I had recommended to buy stocks of Noida Toll Bridge Company earlier this year as well as in year 2009 from long term perspectives. It is definitely a stock to buy now looking at the valuations it is available at.

Business: Noida Toll Bridge company was promoted by Infrastructure Leasing and Financial Services Ltd. (IL&FS) as a special purpose vehicle (SPV) to construct, operate and maintain the Delhi - Noida Bridge on a Build Own Operate Transfer (BOOT) basis. The Delhi Noida Bridge is a tolled facility connecting Noida to South Delhi across the Yamuna river. The Company's principal source of revenue is from the levy of tolls on commuters on this facility.

Outlook: It should be prudent to note that the company's operating income comprises revenues from the toll it collects and hoardings/advertisements on the routes it has developed.The outlook for growth in traffic on the Delhi Noida Bridge is very positive. Traffic levels on the Delhi Noida Bridge are expected to increase as Noida and Greater Noida experience development and population growth. In their review, Halcrow Consulting estimate that by 2021 the population of Noida and Greater Noida areas will increase by 2 million and the daily vehicle trips on the Delhi Noida Bridge will increase to 200,504.

The company has set up a 100% subsidiary, DND Flyway, for the implementation of development rights. Part of the surplus land on the Noida side has been transferred to the subsidiary. These projects have thrown up fresh opportunities for NTBCL.

All this development could fetch huge returns for company and shareholders. Company's current valuation stands at Rs. 11 Billions. This calculates per share cost as on today at Rs. 55-60 and qualifies it as a stock to buy now.

Company has contract with NOIDA to recover the original total cost of project PLUS 20% returns on total cost of project. If in certain financial year, company can not achieve 20% returns due to lower traffic, the shortfall amount would be added to total cost of project which would form the new total cost of project as base cost for next years calculations. NTBCL’s annual report says this amount is Rs. 17 Billions. That comes at Rs. 91 per share. Although NOIDA would not pay it in cash to company, there is a provision in agreement that company has rights to operate the bridge and collect toll till company does not recovers this shortfall. Company management has estimated that it would take 70 years to recover all the shortfall of past and future!

The longevity of business is more than lifetime of a human being and that too assured one. Intrinsic value is very good which makes it a stock to buy. The assurance of income in the form of toll fees is there to remain. Company has all rights to increase toll rates in accordance with inflation rate with approval from NOIDA. Toll rate hike was not approved by NODIA due to recession in 2009, which is going to be reviewed soon by approximately 20% in near future.

Company has paid dividend of 0.50 paisa/share in 2010 which makes dividend yield at 1.5%. This should increase in future.

All in all, NOIDA Toll Bridge Company is a stock to buy now for long term. I would advice you to buy stocks of this company for at least 5 - 10 years.

P.S. I have used this bridge many times and it is truly a world class construction. I have seen the land around it and I consider it personally as one of the most prime land in Delhi and NOIDA area.
Disclaimer: I am buying stocks of NTBCL at CMP.